Oil rose toward $71 a barrel on Thursday as renewed optimism that the U.S. economy was through the worst of the recession offset bearish inventory data showing continued weak demand in the world's largest oil consumer.

Equities markets powered higher after the U.S. Federal Reserve said the U.S. economy was showing signs of leveling out two years after the onset of the deepest financial crisis in decades. ID:nN1272730]

Japan's Nikkei index <.N225> rose 0.7 percent in the morning session while Asian stocks outside of Japan <.MIAPJ0000PUS> gained 1.55 percent by 0330 GMT, tracking a 1.30 percent rise in the Dow Jones industrial average <.DJI>.

U.S. light crude for September delivery rose 41 cents to $70.57 a barrel by 0330 GMT, having gained 1 percent on Wednesday to settle at $70.16, ending a four-day losing streak.

London Brent crude gained 45 cents to $73.34.

The focus overnight has been on the Fed Reserve's commentary. There is speculation that things are going to start improving from here. There is obviously an oil element. There are expectations of big drawdowns in those inventories going forward even if they are still increasing now, said Ben Westmore, commodities analyst at National Australia Bank.

Forecasts that an oil demand recovery is at hand led traders to shrug off bearish weakly stocks data on Wednesday.

The Energy Information Administration reported a much larger-than-expected rise of 2.5 million barrels in U.S. stockpiles and in distillates stocks, which gained 800,000 barrels and a lower-than forecast 1 million draw in gasoline stocks.

Demand for gasoline and distillates also fell last week, the EIA data showed.

The latest US weekly data release is relatively weak, with a further build at Cushing and a further increase in the inventory surplus. A sharp change in the dynamic is likely soon, but for the moment the tone of the data is still rounding out the bottom, Barclays Capital analysts noted in their oil data review.

Potentially tightening supplies and adding support, reports from the U.S. National Hurricane Center said the Atlantic could get its first named storm of the year as a tropical depression strengthens on a track toward the U.S. Virgin Islands.

Tropical storms and hurricanes can disrupt the operations of offshore oil platforms and coastal refineries.

(Editing by Clarence Fernandez)

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